News Alert: Diageo’s Shares Plunge After Profit Warning Linked To Latin America Downturn Inbox

Diageo saw its share price slide more than 14% today to around $136, marking one of its worst days in memory, after the company downgraded the growth outlook for its fiscal first half ending in December, owing to struggles in Latin America. “We have momentum continuing in four of our five regions, however at the group level, in the first half of fiscal 24, we now expect to see slower growth than the second half of fiscal 23,” the company said. Diageo’s overall organic operating profit growth for the fiscal first half is now expected to decline year-on-year, mostly due to lower sales in Latin America.

The drinks giant now sees “a materially weaker performance outlook in Latin America and Caribbean (LAC), which is nearly 11% of Diageo’s net sales value, and is now expected to decline organic net sales by more than 20%, year-on-year, in the first half of fiscal 24.” Diageo noted that the Latin America region is lapping 20% organic net sales growth from a year ago, and that macroeconomic pressure in the region is resulting in lower consumption and consumer downtrading.

While Latin America’s outlook has deteriorated, Diageo said its other regions continue to show positive momentum. In its North America business, Diageo expects “gradual improvement in organic net sales growth in the first half of fiscal 24 of compared to the second half of fiscal 23, while maintaining distributor inventory in line with historical levels.”

In its Europe region, Diageo sees strong growth continuing despite geopolitical tensions escalating in the Middle East, which is part of the same unit, and in Asia Pacific, “we continue to see momentum with good growth, despite slower than expected recovery in China,” the company said.

Across its global business, Diageo is expecting moderating cost inflation, which it plans to offset with higher prices. Looking ahead to the second half of its fiscal year, the group is calling for a gradual improvement in organic net sales and organic operating profit growth from the first half, and it’s planning to invest additional A&P ahead of net sales.

According to Impact Databank, Diageo is far and away the largest spirits company worldwide, with volume of nearly 260 million cases in 2022, accounting for an 18% volume share of the global premium spirits market. In the U.S., its volume share is approximately 14.5%, on a total of 42 million cases.

The news also sent shares of Diageo’s competitors lower, with Pernod Ricard, Campari, and Brown-Forman all seeing declines today.—Daniel Marsteller

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